Arizona hospital group wants to assess $300 million bed tax

Plan anticipates a loss of Medicaid payments in proposed budget cuts

Arizona hospitals want to assess a $300 million bed tax on themselves rather than lose out on Medicaid payments that would be eliminated by proposed state budget cuts.

The Arizona Hospital and Healthcare Association's proposal calls for a one-year assessment on hospitals that is based on the number of days patients spend in hospitals.

The hospital association said the proposal would represent a partial fix to the state's budget gap while preserving health insurance through the state's Medicaid program for childless adults. These adults would lose coverage under budget plans now being considered.

Gov. Jan Brewer has asked the federal government to approve a waiver that would allow the state to drop coverage for about 280,000 residents.

The hospital association estimates that the Medicaid cuts would cost the state's health-care industry about $1.6 billion, with hospitals losing more than $500 million in payments.

"The loss of this funding would have a dramatic impact on Arizona's economy," said Lori Liles, chief executive officer of the hospital association.

Still, the hospitals' plan represents only a partial fix. It would raise $300 million over one year, one-third of which would be returned to the hospitals to ensure provider rates do not increase, Liles said.

Legislative leaders said the hospital proposal falls far short of the $541 million needed to sustain the state's Medicaid program's existing levels.

"It's too little, too late," said Rep. John Kavanagh, R-Fountain Hills, House Appropriations chairman. His district includes Mayo Clinic and Scottsdale Healthcare hospitals, which would fare the worst under the plan.

"This is a non-starter because it's not even a legitimate proposal," Kavanagh said.

Brewer spokesman Matt Benson said Thursday that the governor's staff has not yet reviewed the proposal in great detail and that it will not impact the governor's call for cuts to the state's Medicaid program, known as the Arizona Health Care Cost Containment System.

"We'll have to wait and see what comes out of the Legislature," Benson said.

Brewer is seeking a waiver to the new federal health-care law that requires states to maintain existing Medicaid eligibility until 2014, when nearly universal health coverage begins. Brewer and legislative leaders say the state cannot afford to maintain existing funding levels, in part because federal stimulus funds will go away.

But hospitals worry that deep Medicaid cuts will result in uninsured patients flooding their emergency rooms. Hospitals say they will be forced to pass along those higher costs to private health insurers and the businesses and consumers that pay for health insurance.

Banner Health CEO Peter Fine said the state needs to raise revenue rather than focusing solely on cuts. "This is a problem that needs to be solved," Fine said. "Unless you have revenue generation that is part of the methodology to balance this budget, you create a lot of stress on the infrastructure of this state."